LPL Financial Charged Unreasonable Commissions on Equity Transactions

STATE OF WASHINGTON SECURITIES DIVISION 1 2 3 4

1. PRELIMINARY STATEMENT 5 LPL Financial LLC (“LPL”) submits this Order with respect to the above captioned investigation by 6 the Securities Division of the Washington State Department of Financial Institutions (the “Securities 7 Division”) into whether LPL engaged in acts or practices that violated the Securities Act of Washington (the 8 “Securities Act”), and the regulations promulgated thereunder (the “Regulations”). As the result of a 9 coordinated investigation, the Securities Division concluded that LPL charged unreasonable commissions to 10 retail customers in excess of five percent (5%) of the principal amount on certain small principal equity 11 transactions. Nationwide, LPL charged unreasonable commissions on approximately 127,045 equity 12 transactions over a five-year period from April 30, 2020 to April 30, 2025 (the “Relevant Time Period”) 13 totaling $2,486,739.20, which included 1,724 accounts of residents of Washington State who were charged 14 commissions in excess of 5% totaling $61,456.75. 15 This Order is submitted solely for the purpose of settlement and with the understanding that it will not 16 be used in any proceeding unless it is accepted by the Securities Division as hereafter set forth. If this order is 17 not accepted by the Securities Division, the Order is withdrawn and shall not be used in or become part of any 18 proceeding. If the Order is accepted, it will conclude the Securities Division’s investigation and any civil or 19 20 21 IN THE MATTER OF DETERMINING Order No. S-25-3997-26-CO01 Whether there has been a violation of the

22 Securities Act of Washington by: LPL Financial LLC, Respondent.

administrative actions that could be commenced pursuant to the Securities Act for the specific violations resolved herein, solely as it relates to Respondent. LPL neither admits nor denies the facts set forth in Section V and the violations of law set forth in 1 Section VI below, agrees to the representations and undertakings set forth below, and consents to the entry of 2 this Order by the Securities Division thereby settling the above-captioned matter with prejudice. This order is 3 necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes 4 fairly intended by the policy and provision of the Securities Act. 5

1. JURISDICTION

2. The Securities Division has jurisdiction over matters relating to securities pursuant to the Securities

7 Act of Washington, codified at RCW 21.20. 8

1. This Order is made in accordance with the Securities Act of Washington, and with the Regulations
   9 codified at WAC 460-20C. 10

2. The acts and practices that are the subject of the Securities Division’s investigations occurred while

11 LPL was registered as broker-dealer in Washington State. 12

1. RELEVANT TIME PERIOD

2. Except as otherwise expressly stated, the conduct described herein occurred during the approximate
   14 time period of April 30, 2020 to April 30, 2025 (the “Relevant Time Period”). 15

3. RESPONDENT

4. LPL Financial LLC (“LPL”) is a broker-dealer registered in Washington State with a main address of
   17 1055 LPL Way, Fort Mill, South Carolina. LPL is identified by Financial Industry Regulatory 18 Authority (“FINRA”) CRD No. 6413. LPL maintains 763 branch offices in Washington State. 19

5. STATEMENT OF FACTS

6. LPL’s Minimum Commission Practices for Equity Transactions Failed to Ensure

Transactions Were Executed at a Fair and Reasonable Price

1. During the Relevant Time Period, LPL charged unreasonable commissions to thousands of retail
   brokerage customers on transactions that exceeded 5% of the principal amount of the customers’ 1 transactions. 2

2. For equity transactions executed during the Relevant Time Period, LPL generally charged retail
   3 brokerage customers according to a tiered commission schedule—calculated based on the principal 4 amount of the trade. 5

3. The commission schedule ranged from .60% to 1.5% of principal plus a $5.00 confirmation fee for
   6 each trade. 7

4. LPL charged a minimum commission of $30 on equity transactions (the “Minimum Equity

8 Commission”). 9

1. LPL’s fee schedule notes that the maximum commission shall not exceed 5% of the principal. LPL’s
   10 policies and procedures did not contain a similar restriction on transactions involving the Minimum 11 Equity Commission. 12

2. The Securities Act and Regulations prohibit LPL from charging unreasonable commissions for services
   13 performed. 14

3. FINRA Rule 2121 Supplementary Material .01 (Rule 2121.01) provides a guideline of five percent for
   15 determining whether a commission is unfair or unreasonable. However, the “5% Policy” is a guide, not 16 a rule. A commission pattern of five percent or even less may be considered unfair or unreasonable 17 under the 5% Policy. 18

4. In Washington State, LPL executed approximately 3,183 equity transactions for which the principal
   19 trade amount was $2,500 or less that included an unreasonable commission for services performed (i.e. 20 in excess of 5% of the principal trade amount) totaling $61,456.75. 21

5. Certain equity transactions executed by LPL included a commission well in excess of 5% of the
   principal value of the transaction.

6. LPL Did Not Reasonably Supervise Transactions That Applied the Minimum Equity

Commission 1

1. LPL did not reasonably supervise transactions that included a Minimum Equity Commission charge to 2
   ensure that LPL charged its customers a reasonable commission. 3

2. LPL only systematically surveilled commissions in ancillary instances of potential sales practice 4
   violations—including an alert used to review accounts with potential excessive trading, an alert used 5 to surveil account concentrations, and an alert to identify either customer specific or overall 6 commissions generated by an agent. 7

3. LPL did not have in place surveillance sufficient to supervise small principal transactions where the 8

Minimum Equity Commission was in excess of 5%. 9

1. As a result, LPL failed to adequately supervise small principal equity transactions where the Minimum 10

Equity Commission was in excess of 5%. 11

1. VIOLATIONS OF LAW 12

2. Pursuant to WAC 460-20C-150, it is a violation of the Securities Act for a broker-dealer to fail to 13
   establish and maintain a system to reasonably supervise its agents. In accordance with RCW 14 21.20.110(1)(j), such conduct is grounds for a censure and a fine. 15

3. REPRESENTATIONS AND UNDERTAKINGS 16
   LPL in full settlement of these matters neither admits nor denies the Statement of Facts as set forth in 17 Section V, and neither admits nor denies the Violations of Law set out in Section VI, makes the following 18 representations, and agrees to the undertakings herein as part of the Order: 19

4. LPL agrees to permanently cease and desist from conduct in violation of WAC 460-20C-150; 20

5. LPL agrees to be censured by the Securities Division;

6. LPL agrees to provide restitution in an amount of no less than $61,456.75 providing the amount of the
   commission on certain small principal equity transactions for which the principal trade amount was 1 $2,500 or less that exceeded five percent 5% of the principal trade amount during the Relevant Time 2 Period to the affected Washington customers set forth in Exhibit A, plus interest in the amount of 6% 3 from the date of the transaction to May 19, 2025. LPL agrees to provide restitution within sixty (60) 4 days of execution of any Order issued pursuant to this Order; 5

7. LPL agrees that restitution shall be in the form of a dollar credit to current customer accounts,
   6 or a check for all former customers or current customers who are entitled to restitution as a 7 result of transactions involving an individual retirement account; 8

8. LPL agrees to provide a notice of restitution to customers. The Notice shall be sent with the
   9 distribution of any restitution. Within forty-five (45) days of the transmission of the Notice, 10 LPL shall provide the Securities Division with a list of all Washington residents for whom LPL 11 receives a Notice as returned to sender ("Undeliverable Washington Residents"). To the extent 12 the Securities Division has access to different address information, LPL shall send a second 13 Notice to each Washington resident within thirty (30) days of the Securities Division providing 14 such different address; and 15

9. LPL agrees to, within one-hundred twenty days (120) days of the transmission of the final
   16 Notice pursuant to paragraph VII(C)(iii), above, prepare, and submit to the Securities Division, 17 a report detailing the restitution paid pursuant to the Order, which shall include: 18

10. Identification of all payments made; and

11. Dates, amounts, and methods of the transfer of funds for all restitution payments;

12. LPL agrees to pay an administrative fine in the amount of $25,000 to the Securities Division within
    fifteen (15) days following the date of entry of this Order. Payment shall be: (1) made by United States postal money order, certified check, bank cashier’s check, bank money order, or wire; (2) made payable to the Department of Financial Institutions; (3) either hand-delivered, mailed to 150 Israel Rd SW, 1 Tumwater, Washington 98501; or wired per the Securities Division’s instructions; and (4) submitted 2 under cover letter or other documentation that identifies payment by LPL and the docket number of the 3 proceeding; 4

13. LPL agrees that a person not unacceptable to the Multi-State Group shall certify in writing to the
    5 Securities Division within sixty (60) days of the date of entry of this Order that the LPL’s policies and 6 procedures have been changed and enhanced to ensure that all commissions are fair and reasonable. 7 At a minimum, LPL shall certify that its policies and procedures include the following: 8

14. Compliance and Operational systems to prevent the imposition of unreasonable or unfair
    9 commissions; 10

15. Incorporation of all securities transactions, regardless of the principal amount of the transaction,
    11 into any systems used to identify and review potentially excessive commissions; and 12

16. Revisions to its policies and procedures sufficient to ensure the adequate implementation of the
    13 above. 14

17. LPL agrees to retain copies of any and all report(s) as set forth in paragraphs (C) through (E) above in
    15 an easily accessible place for a period of five (5) years from the date of the reports. 16

18. LPL agrees not to claim, assert, or apply for a tax deduction or tax credit with regard to any state,
    17 federal or local tax for any amounts that LPL shall pay pursuant to this Order; 18

19. If either LPL is the subject of a voluntary or involuntary bankruptcy petition under Title 11 of the
    19 United States Code within three hundred sixty-five (365) days of the entry of this Order, LPL agrees 20 to provide written notice to the Securities Division within five (5) days of the date of the petition. 21

20. LPL agrees that any fine, penalty, and/or money that LPL shall pay in accordance with this Order is
    intended by LPL and the Securities Division to be a contemporaneous exchange for new value given to LPL pursuant to 11 U.S.C. § 547(c)(1)(A) and is, in fact, a substantially contemporaneous exchange 1 pursuant to 11 U.S.C. § 547(c)(1)(B). 2

21. LPL agrees that, upon the issuance of an Order by the Securities Division that contains the terms as set
    3 forth above, if LPL fails to comply with any of the terms set forth in the Order, the Securities Division 4 may institute an action to have this Order declared null and void. Additionally, after a fair hearing and 5 the issuance of an order finding that LPL has not complied with the Order, the Securities Division may 6 move to have the Order declared null and void, in whole or in part, and re-institute the associated 7 proceeding that had been brought against LPL and 8

22. For good cause shown, the Securities Division may extend any of the procedural dates set forth above.
    9 LPL shall make any requests for extensions of the procedural dates set forth above in writing to the 10 Securities Division. 11

23. WAIVER
    12 LPL hereby waives all rights to contest an Order entered by the Securities Division pursuant to this 13 Order, including, but not limited to, (A) the right to contest whether the Order is fair, reasonable, and/or in the 14 public interest, (B) the right to contest the Order’s findings of fact, and (C) the right to contest the Order’s 15 conclusions of law. LPL further waives the procedural due process right to a hearing, all procedural rights 16 provided by RCW 21.20, and the right to seek judicial review of the Order under RCW 21.20.440 and RCW 17 34.05. 18

24. NO DISQUALIFICATION
    19 A signed order issued pursuant to this Order waives any disqualification in the laws of Washington 20 State, or rules or regulations thereunder, including any disqualification from relying upon the registration 21

exemptions or safe harbor provisions to which LPL may be subject. This Order is not intended to be a final order based upon violations of the Securities Act that prohibit fraudulent, manipulative, or deceptive conduct. This Order is not intended to form the basis of any disqualifications under Section 3(a)(39) of the Securities 1 Exchange Act of 1934; or Rules 504(b)(3) and 506(d)(1) of Regulation D, Rule 262(a) of Regulation A and 2 Rule 503(a) of Regulation CF under the Securities Act of 1933. This Order is not intended to form the basis 3 of disqualification under the FINRA rules prohibiting continuance in membership absent the filing of a MC- 4 400A application or disqualification under SRO rules prohibiting continuance in membership. This Order is 5 not intended to form a basis of a disqualification under 204(a)(2) of the Uniform Securities Act of 1956 or 6 Section 412(d) of the Uniform Securities Act of 2002. Except in an action by the Securities Division to enforce 7 the obligations of this Order, any acts performed or documents executed in furtherance of this Order: (a) may 8 not be deemed or used as an admission of, or evidence of, the validity of any alleged wrongdoing, liability, or 9 lack of any wrongdoing or liability; or (b) may not be deemed or used as an admission of; or evidence of, any 10 such alleged fault or omission of LPL in any civil, criminal, arbitration, or administrative proceeding in any 11 court, administrative agency, or tribunal. 12 WILLFUL VIOLATION OF THIS ORDER IS A CRIMINAL OFFENSE. 13 14 Signed this 6th day of February 2026. 15 16 17 Signed by: LPL Financial LLC 18 19 ________/s/_____________ 20 Print Name: Michael K. Freedman 21

Title: EVP, Deputy General Counsel _______________________________________________________________________________________ 1 SIGNED and ENTERED this 17 day of March, 2026. th2 3 4 5 6 7 8 __________/s/____________ Faith L. Anderson 9 Acting Securities Administrator 10 Approved by: Presented by: 11 _________/s/______________ __________/s/____________ 12 Brian J. Guerard Anna Harkness Chief of Enforcement Financial Legal Examiner 13 Reviewed by: 14 15 _________/s/______________ Holly Mack-Kretzler 16 Financial Legal Examiner Supervisor 17 18 19 20 21